First hi-tech park attracts over $1.2 bil

The total investment into Vietnam’s first hi-tech park has climbed to over US$1.2 billion after its management board granted investment certificates to five new businesses early this week, VnExpress reports.

Newly-licensed projects at the Hoa Lac Hi-tech Park in Hanoi include a  $50-million complex of hi-end constructions specific for programmers, invested by the FPT Software Joint-stock company. Works on the complex is expected to be completed in 2016.

The FPT Hoa Lac Hi-tech Park Development Co. Ltd., meanwhile, has invested $35 million in a hi-tech industry area which will provide investors there with technical infrastructure of international standards, according to the news website.

So far, the Hoa Lac Park has attracted 47 projects, Nguyen Van Lang, deputy minister of Science and Technology and also head of the park’s management board, told VnExpress.

From now until Tet, Vietnam’s traditional Lunar New Year festival, another 12 investment certificates will be granted, Lang said, adding that they are also reviewing 38 other potential projects.

Established in October, 1998 with a total area of nearly 16,000 hectares, the Hoa Lac Hi-tech Park was built as a “science city” with all relevant services and functional areas for software, research and development, hi-tech, and education and training, the news source said.

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Lawmakers make field-trip to Vietnamese firms in Cambodia

A delegation from the Vietnamese National Assembly is on a visit to
Cambodia from October 14-18 to inquire about operations of
Vietnamese-invested businesses.

Headed by Chairman
of the NA’s Committee for External Relations Nguyen Van Son, the
delegation held working sessions with a number of companies, including
Viettel Cambodia , the Vietnam Rubber Group’s Representative Office,
the Bank for Investment and Development of Cambodia (BIDC), the
Cambodia-Vietnam Insurance Company (CVI) and the VTC Online Cambodia
Company.

The lawmakers heard reports on the
operations and difficulties of the targeted businesses as well as their
proposals for possible government’s help.

They also
made a field-trip to rubber tree farms of the Vietnam Rubber Group in
Kompong Thom province and called at the Tan Bien, Ba Ria, Phuoc Hoa And
Chu Se companies.

The legislators are scheduled to
visit Siem Reap province where they will meet with and learn about
operations of Vietnamese-invested firms that are operating in
north-western provinces of Cambodia./.

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Banks begin to cut back interest rates

Photo: Tuoi Tre

Many commercial banks Friday started to cut their deposit interest rates by 0.2 percentage points to 11 percent per year in compliance with a recent agreement.

The agreement, made between the Viet Nam Banks Association (VNBA) and the State Bank of Vietnam, asks banks to cut their interest rates to no more than 11 percent, instead of 11.2 percent.

The move is designed to urge banks to cut capital input costs and help enterprises access more credit.

Asia Commercial Bank (ACB) is the first bank to apply the new interest rate on 36 month deposits. Interest rates for one week to 24 month deposits range from 9.9 to 10.88 percent per year.

But ACB will give depositors cash as a bonus, which is equal to 0.15 percent of their primary deposit.

Earlier this week, Techcombank, DaiA Bank, HDBank also cut their deposit interests rates to below 11.2 percent.

As inflation pressures continue to grow during the final months of the year interest rate cuts would be executed with prudence with respect to the market’s behavior and the depositor’s expectations, said VNBA.

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Ford to sell most of stake in Japan's Mazda: reports

TOKYO - US carmaker Ford Motor has decided to sell the bulk of its 11 percent stake in Japan's Mazda Motor and invest the money instead in emerging markets, reports said Saturday.

Ford, which has been the top shareholder in the Hiroshima-based automaker since 1979, plans to slash its current equity stake of 11 percent to three percent or less, the Nikkei business daily said without naming its sources.

At times Ford has owned more than a third of Mazda, but started cutting its stake in 2008 in the wake of the global financial crisis.

The two firms have reached a basic agreement on the deal, Nikkei said. The Mazda shares held by Ford are worth a total of 42 billion yen (US$515 million) based on Friday's closing price on the Tokyo stock market.

Jiji Press said Ford would use the money it gains through the sale to invest in emerging countries with high growth potential. The two companies are expected to make a formal decision in November, Jiji said.

Mazda, Japan's fifth largest automaker, declined to comment on the reports, saying they were "the result of speculation" by journalists.

"Mazda and Ford continue to enjoy a close strategic partnership and there is no change to this relationship. As before, we continue to cooperate in areas of mutual benefit. We do not comment on speculation," it said in a statement.

Mazda spokesman Kotaro Minagawa said the company would neither confirm nor deny the reports.

The Nikkei said the shares are likely to go to Mazda's main creditor Sumitomo Mitsui Banking Corp., as well as trading house Sumitomo Corp. and other Sumitomo group firms.

Once the sale is completed Ford would be no longer be Mazda's top shareholder, it said.

The Wall Street Journal reported Ford's chief financial officer said the US and Japanese automakers would continue to work together but intend to compete separately in China, the world's largest car market.

Lewis Booth, Ford's executive vice president and chief financial officer, said in a recent interview with the paper that Ford has "had a 30-something-year history of working with Mazda and it's going to continue".

But Booth confirmed that Ford was seeking to dissolve its three-way venture in China between Ford, Mazda and Chongqing Changan Automobile Co., with Mazda and Ford instead having two separate tie-ups with the Chinese company.

"We work on projects that make sense to the two of us and if they don't make sense to the two of us, we don't work on them," Booth reportedly said of Ford's relationship with Mazda.

"With the growth in China and the investment that each of us are going to make in China, we decided to split the joint venture."

Ford became Mazda's top shareholder in 1979 as it purchased 25 percent of its outstanding shares. It raised the stake to 33.4 percent in 1996 to gain management control over the struggling Japanese company.

Ford has since reduced its stake to 11 percent due to the US carmaker's need to raise badly needed cash during the recession and due to Mazda's issuance of new shares.

US and Japanese automakers started alliances in the 1970s but many of them have recently been unwound.

General Motors, in the face of heavy losses, has sold its stakes in Japanese truck maker Isuzu Motors, car maker Suzuki and Subaru vehicles maker Fuji Heavy Industries. Suzuki is now allied with Volkswagen of Germany.

Toyota Motor has closed a plant in California that it jointly owned with GM.

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ADB urges multi-national effort against “Dollarisation”

The Asian Development Bank (ADB) has pointed out a need for regional
cooperation in monetary and financial issues, particularly to deal with
the issues of multiple currencies within domestic economies.

The region’s biggest development bank made the statement in the latest study, which was published on October 15.

The study, Dealing with Multiple Currencies in Transitional
Economies: the Scope for Cooperation in Cambodia , Laos , and
Vietnam , is a pioneering work on the multiple-currency phenomenon with
important recommendations for promoting regional monetary and financial
cooperation.

In the three target countries, other
countries’ currencies, particulary the US dollar, are found in broad
use. The share of foreign currencies ranges from around 20 percent of
all currency in circulation in Vietnam , about 50 percent in Laos ,
and more than 90 percent in Cambodia .

In this
regard, the ADB Country Director for Vietnam , Ayumi Konishi,
recognised progress made by the country in de-dollarisation.

“Yet, authorities, especially the State Bank of Vietnam , are
fully aware that administrative measures alone cannot be effective”,
said the ADB residential chief.

He explained that
in order to de-dollarise the Vietnamese economy, it is essential to
enhance people’s confidence in Vietnamese dong through sustainable and
high economic growth, stabilisation of the foreign exchange rate,
reforms in monetary policies, and strengthening of the capacity of
financial institutions.

Jayant Menon, Principal
Economist in ADB’s Office of Regional Economic Integration, a co-editor
of the study, remarked “Dollarisation blunts the tools for macroeconomic
stabilisation, especially monetary and exchange rate policy, that a
country like Vietnam needs in order to tackle a variety of economic
and developmental challenges, such as rising inflation”.

He warned Vietnam , where the US dollar makes up 20 percent of the
total money circulation, for its partial dollarisation which may lead
to some limitations especially in deploying policies for macroeconomic
stabilisation.

Solutions such as official
dollarisation, compulsory de-dollarisation and mono currency are all
infeasible, said the ADB expert.

Experts
recommended three solutions, including the short-term solution which
highlights strengthening the momentum for depositing savings in the
Vietnamese dong instead of the US dollar or gold. They also urged banks
to encourage long-term saving deposits in the Vietnamese dong and reduce
sudden changes or any instability in the short-term saving deposit
interest rates.

Their recommendations for a
medium-term solution included a currency-bound mechanism and reserving
the right to mould or print currency.

For a
long-term solution, experts recommended the economy be prepared for the
de-dollarisation process, building financial institutions and speeding
up reforms in the State-owned enterprise sector for sustainable
development.

The other co-editor of the study,
Giovanni Capannelli, Principal Economist in the ADB Institute, urged
monetary authorities of Cambodia , Laos and Vietnam to share
information and experiences in order to find a solution to the
dollarisation issue.

“The three countries have a
lot to gain from closer cooperation, both among themselves and with the
rest of the members of the Association of Southeast Asian Nations”, said
the ADB expert.

ADB, based in Manila , is
dedicated to reducing poverty in Asia and the Pacific through
inclusive economic growth, environmentally sustainable growth, and
regional integration.

In 2009, it approved a total
of 16.1 billion USD in financing operations through loans, grants,
guarantees, a trade finance facilitation programme, equity investments,
and technical assistance projects.

Vietnam will host ADB’s 44 th annual meeting in Hanoi in May 2011./.

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Intel to open 1 bln USD factory in Vietnam

Intel Corporation, the world’s largest semiconductor chip maker, will
open its 1 billion USD chip assembly and testing facility in Vietnam
by the end of this month, an executive said.

Intel’s
investment in Vietnam is aimed at tapping growth opportunities in
emerging Asia , Navin Shenoy, Intel’s general manager for Asia-Pacific,
was quoted by The Wall Street Journal as saying on Oct. 14.

"We
expect Asia ’s PC market to continue to grow by more than 20 percent
annually in the next few years. We definitely will continue to invest in
Asia where we see growth," he said.

Intel Corp., the first
major foreign investor in high technology in Vietnam, started
construction of the Vietnam facility in 2007, and 4,000 people are
expected to employ for the plant, according to the paper.

The
Vietnam facility is Intel’s seventh assembly and test site. Other
sites include Penang and Kulim in Malaysia, Cavite in the
Philippines, Chengdu and Shanghai in China, and San Jose in
Costa Rica.

Shenoy said that China, India, Indonesia and
Vietnam are important markets of the US chip maker in Asia, which
has a young population and a low PC penetration rate. He added while the
company is seeing relatively weak sentiment in the US and European
consumer markets, Asian customers and enterprises continue to buy PCs.

Intel
reported more than 11 billion USD in quarterly revenue for the first
time in the third quarter. 58 percent of its third-quarter revenue came
from the Asia-Pacific region which rose 20 percent to a record 6.40
billion USD, compared with 5.32 billion USD a year earlier./.

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Weak supporting industry threatens FDI

 A Honda motorbike engine on display at an exhibition in Ho Chi Minh City. Vietnamese firms are able to meet only a very small part of the demand from Japanese investors for spare parts and accessories.

Vietnam faces a reduction in foreign capital inflow even as it implements free trade agreements with its partners because its underdeveloped supporting industries will be a discouraging factor, experts say.

The Japan International Corporation Agency (JICA) has said Vietnam would not be a choice for foreign investors interested in the ASEAN region to set up factories over the next five years, if the supporting industries developed very slowly.

ASEAN members including Vietnam will complete the Common Effective Preferential Tariff, cutting import taxes on most items to zero in 2015. Some tariffs will be removed three years later.

JICA expert Katsumata Teruhisa said investors would house their factories in countries where supporting industries are highly developed, and only consider the others as potential markets.

Vietnam’s supporting industries were far less developed than other ASEAN countries like Thailand, Malaysia and Indonesia, he said.

Vietnamese firms are at present able to meet only a very small part of the demand from Japanese investors for spare parts and accessories in the automobile, motorbike, electric and electronic industries.

The local content ratio was about 5 to 10 percent in automobiles, 20 to 40 percent in electrics and electronics and 70 to 80 percent in motorbikes, Teruhisa said.

Half the content in local motorbikes was provided by foreign traders or investors who’ve set up factories in the country, he added.

Le Tuan Anh, managing director of Cathaco, said it was not easy for local firms to start up supporting industries because of the capital and skilled labor force required. Moreover, those entering this business need to be patient about getting returns on their investment, he said.

Cathaco, one of pioneers in the industry since 1999, manufactures parts and components of television sets or computers for foreign-invested businesses.

Anh said many local firms were not patient enough to run supporting industries which require producers to take care of details. They typically wanted to see their profits very quickly with minimum trouble, he said.

“That is the reason why only a small number of small- and medium-sized enterprises are involved in the (supporting) industries and why they have developed slowly in the country,” he told Thanh Nien Weekly.

Anh said his company was seeking foreign partners in Singapore, Thailand, Malaysia or China to join a new project which aims to increase its capacity and competitiveness because it was difficult to find local partners.

More time needed

Viroj Sirithanasart, managing director of Thai Tool and Die Industry Association, said it takes at least 10 years for a country to develop its supporting industries and Vietnam would need more than that.

Government support with favorable development policies and the supply of skilled labor was necessary for this development, he stressed.

Sirithanasart said Thailand had started developing supporting industries for electronics, plastics and steel over 10 years ago and now the country is focusing on the automation industry.

Thai supporting industries mainly serve the automobile industry and their capacity, with about 50,000 firms in the fray, exceeds its export demand.

Vietnam should utilize support from France and Japan, he said, adding the latter has also helped Thailand to develop is supporting industries.

Thai businesses are looking to collaborate with Vietnamese partners to develop the industry in the country, he added.

JICA has said it is developing a project to help increase local content in products made by Japanese businesses in the automobile, motorbike, electrical and electronic industries.

The project, which will work with 100 businesses over four years from 2010, was surveying requests from local businesses in three main regions of the country, the agency said. It said 21 businesses have been selected so far to receive support from Japanese experts in the technical aspects of plastic production and die-casting as well as management activities.

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